In general, investment theory says that people should not try to time the market, with history showing it to be a fool’s game.

And yet, here we are with the equity market at an all-time high, bonds still at historic low yields, and the Federal Reserve committed to unwinding years of quantitative easing.

Clearly, advisors should be taking a different approach in this environment than they would be if conditions were different.

So how can advisors build better client portfolios right now?

“Yes, stocks are high, but there’s no safe way to predict an end to the up market,” said David Blanchett, head of retirement research at Morningstar Investment Managers in Chicago.

“You shouldn’t be too aggressive or too defensive,” he said. “Figure out the strategic target of your client, and then don’t try to make huge timing calls — just tweak around the edges.”

Rick Rummage, president and career consultant at The Rummage Group in Herndon, Virginia, which trains advisors, said that he isn’t sure that many of them understand what they are being paid to do.

“They think clients want to get the maximum return on their investment and to beat the averages, but most of them can’t do that and shouldn’t even try. What clients really need is a laid-out plan of what they should be doing, how much they should diversify, how much they should be saving and to know the difference between depreciating and appreciating assets,” Rummage said.

“So be an educator; don’t try to beat the averages if the best minds on Wall Street can’t do it,” he said.

But that is easier said than done, said Darrick Hutchens, a CFP and managing partner at Monon Wealth Management, an independent firm in Carmel, Indiana.

“The problem is that all clients focus on [is] how we do relative to the U.S. stock market,” he said. “If the U.S. market is on fire, and you have them only 50% allocated to equities, your client is going to be disappointed because you aren’t beating the market benchmark, but if the U.S. market drops, that same client is going to be disappointed in you because then his benchmark is cash.”

Hutchens said his answer in this market is to take a technical, not fundamental approach.

“When the market is going up, we’re go, go, go, and when the market falls, I’m just going to move people to cash,” he said.

This story is part of a 30-30 series on building a better portfolio.

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